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Questions › DSE › DSE 2018 › Q24
4 marks, −1Economics of Growth and Development › Harrod–Domar and Solow growth models › The Solow model and its steady stateModerateabout 2 min

DSE 2018 Question 24: Harrod–Domar and Solow growth models

Consider a Solovian economy with Yt=Kt1/2Nt1/2Y_t = K_t^{1/2} N_t^{1/2}Yt​=Kt1/2​Nt1/2​, population 100100100 (no growth), initial capital 999, saving half of income, and 100%100\%100% depreciation within one period. The steady-state value of aggregate capital stock is

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Consider a Solovian economy with Yₜ = Kₜ^(1/2) Nₜ^(1/2), population 100 (no growth), initial capital 9, saving half of income, and 100% depreciation within one period. The steady-state value of aggregate capital stock is (A) 9 (B) 25 (C) 2.5 (D) 10

Also written as: Consider a Solovian economy with Y_t = K_t^(1/2) N_t^(1/2), population 100 (no growth), initial capital 9, saving half of income, and 100% depreciation within one period. The steady-state value of aggregate capital stock is

Harrod–Domar and Solow growth models has come up 113 times in 7 exams since 2006.

What this question tests

This question is on The Solow model and its steady state, part of Harrod–Domar and Solow growth models in Economics of Growth and Development.

Growth with substitutable factors: capital per worker settles where saving covers depreciation and dilution.

TestStop has 38 past-paper questions on this subtopic; the nearest in year are below.

  • IIT JAM 2022 · Q14An economy follows the Solow model with production function y = √k, where y is output per worker and k is…
Practise Harrod–Domar and Solow growth modelsMore on The Solow model and its steady state

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Question from the DSE 2018 paper. Solutions are TestStop's own. Not affiliated with or endorsed by any examination authority.